Fannie Mae-No Politics (FNMA)

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Transfer of risk to private investors!!!!!


Fannie Mae plans to sell about $675 million of securities in its first transaction aimed at transferring some mortgage risk to private investors, according to deal documents circulated to investors.

The securities are synthetic notes whose value will depend on the performance of a pool of $28.05 billion of mortgages acquired by Fannie Mae in the third quarter of 2012, according to the term sheet reviewed by The Wall Street Journal.

The deal, expected to be announced in mid-October, follows a similar issue from Freddie Mac in July. Both government-chartered mortgage finance entities are issuing the securities to help meet a regulatory mandate to reduce the cost of defaults to U.S. taxpayers, who bailed the companies out during the financial crisis.

Fannie Mae expects the securities to obtain a BBB- rating from Fitch Ratings, in a likely attempt to broaden the field of investors, according to the investors that saw the deal documents.

Freddie Mac's deal wasn't rated, but Freddie Mac executives in July said investors suggested that debt ratings were important to expand their participation in future deals.

Write to Al Yoon at [e-mail]